The advent of pay-tv in the 90s has changed the way football has been managed, providing seemingly endless amount of money to clubs that, in most cases, just … flown into the pockets of players and agents as part of an escalation in purchase prices and remuneration.
Revenues and costs: last 20 years trend
The table below shows the 54 first division UEFA competition revenue trend and compares it with the staff cost evolution: although 2014 did mark a figure in contrast (with a reduction from 64% to 58.5%), this is the first time since 2008 such falls below 60%.
All appears even more evident in the second graph, which shows the comparison of absolute changes on an annual basis. If, on average, revenues have grown more that personnel costs in absolute terms (an average of E730M vs E430M per year), there were nine out of the twenty years examined (45% of the total) in which the values basically went hand in hand with differences contained within E100k.
These period values tell us that compared to an average annual turnover growth of E700k, 60% was allocated to the increase of players salaries. If we don’t take into account the years beyond 2009 (which saw the approval of the Regulations on Financial Fair Play, and thus of least a kind of psychological watershed in terms of cost control), the percentage would rise to 67.5%.
It is no coincidence, in fact, that in the following years the average turnover increase (E800k) corresponds to a salaries growth of “just” E400k per year, ie 43%. For this sudden change we must especially thank the English Premier League, which introduced specific limitations to prevent the huge increase in broadcasting rights (from 2014/15 onward) to be was spent excessively in players. 2014 is the year in which there is one of the highest growths in revenues over the previous year (E900k) against a reduction (-E300k) in personnel costs.
The impact of broadcasting rights
According to the latest UEFA survey (2014 Benchmark), out of the E15.9 billions, 33.3% was accounted for by domestic broadcasting rights, to which we should add even the UEFA prizes for UCL and UEL participation Taking into account also these values (for an additional E1,3 billions), the TV contribution to European football reaches the figure of E6.6 billions, which is 41.5% of the total.
We then find sponsorships (E4 billions, 25.2%), matchdays (E2.5 billions, 15.7%), commercials (E1.3 billions, 8.2%). Other revenues, among which also the proceeds from the transfer market, accounts for more than E1.5 billions (9.4%).
The importance of broadcasting rights is not homogeneous within the UEFA World: only the Big-5 obtained from this entry revenues higher than E500M (the lower being Ligue 1, with E509M) while the other 10 major competitions only receive from this source a residual share of revenues.
Outside of this group of 15 countries, the average weight is less than 10%, with the exception of Romania (36%), Cyprus (22%) and Hungary (21%).
The Big-5 are working to further increase their revenues. Footballbenchmark.com (managed by KPMG) has recently published a summary of the current existing agreements (for the domestic share of the broadcasting rights) and the expected evolution in the coming seasons.
But they are not stopping there. The German DFL has already announced that in the next four-year cycle which will be put out to tender (2017-2021) it will not anymore assign the broadcasting rights to a single operator (now Sky Deutschland), but rather feature eight packages: four for pay tv, three “hybrid” (pay and free TV) and one exclusively going free air. The goal is not to favor supporters, but to increase the values with a minimum set at E1 billions per year and a target up to E1.5 billions.
In Spain they are still not happy with the result obtained and are investing in particular on the International market, with dedicated marketing operations in pursuit of what for years had effectively from the Premier League.
The different distribution criteria
Gradually, the individual bargaining system has lost in favor of a centralized system of collective bargaining: Spain was the last of the Big-5 to change, following the publication of the Royal Decree Law n. 5/2015, whose rules will come into effect from the 2016/17 season onward.
Apart from the different sales methodology adopted, what is clear is the different approach to distribution criteria that however move around three main principles, declined very differently among the various Countries:
- a share distributed equally between all participants;
- a share based on results (with important differences in their definition);
- a share coming from the attractiveness of the club, whether for sport or market visibility.
We will analyze in detail the criteria when we focus on individual systems, but it is evident from the graph of how deep are the differences between the various competitions.
(please see next page ->)
